Trusting Doesn’t Mean a Trust

Consider the case of Hubbard vs. Shankle, 138 S.W.3d 474 (Tex.App.- Ft. Worth 2004). It all started when Craig Curtright, divorced with a two year old daughter, met Suzie Shankle on the internet. They entered into a romantic relationship. Craig told Suzie that he was naming her as the beneficiary of his life insurance policy because he wanted her to have the money and he wanted her to take care of the college expenses of his young daughter.

Three months later, Craig died of a heart attack. Suzie received about $110,000 from his life insurance, and promptly spent $45,000. She put the rest in her bank account. Suzie admitted that some of the money had been intended for the young daughter’s college expenses, but said she wasn’t obligated to spend it that way. Craig’s older daughter, Lainee Hubbard, became administrator of his estate. She sued Suzie.

Suzie won. Here’s why: Craig named Suzie, individually, as beneficiary of the life insurance. He didn’t mention a Trust, or put Trustee after her name. He never stated that he wanted to form a Trust. His vague oral statement of his intent mentioned that he wanted to benefit both Suzie and his daughter, but he never set out amounts or portions. Suzie did not owe any duty to Craig, and did not act unfairly. Craig and Suzie never formed a contract, and their romantic relationship wasn’t enough to create a fiduciary duty between them. Suzie didn’t commit a fraud against Craig, or exert duress to make him change the beneficiary designation.

Craig took a short cut and his young daughter was the loser.What could Craig have done to protect his daughter’s interests? He could have actually formed a Trust, and named the beneficiary on his life insurance as Suzie, Trustee of the Curtright Trust. He could have named the beneficiary as his Estate, and signed a Will leaving 1⁄2 to Suzie and 1⁄2 to a trust for the benefit of his daughter. He could have named both his young daughter and Suzie as the beneficiaries on his life insurance.

He could even have consulted an attorney.

Virginia Hammerle is a Board Certified Civil Trial Attorney by the Texas Board of Legal Specialization and an Accredited Estate Planner by the National Association of Estate Planners & Councils. She can be contacted at legaltalktexas@hammerle.com. The information contained in this article is general information only and does not constitute legal advice. ©2014